Amazon’s pay raise hits a rough patch

Jazz ShawPosted at 7:01 pm on October 6, 2018

When Amazon announced that they would be raising the pay of all workers to a minimum of $15 per hour, they became instant heroes on the left and with labor unions around the country. But as it turns out, no good deed goes unpunished and there were still going to be people complaining about it. In this case, it’s a bunch of the workers at Amazon who say that they’re actually going to wind up losing money, among other complaints. (Yahoo Finance)

But for some Amazon employees, the excitement didn’t last very long as they learned that existing financial incentives and bonus programs, including stock and monthly bonuses, that usually boost paychecks will be eliminated starting November 1.

Several Amazon warehouse workers in the U.S., who spoke to Yahoo Finance on the condition of anonymity fearing reprisals, talked about how the change will negatively affect them. After the removal of these perks, some workers said they will be making less. Most of the workers who voiced concerns have been working for the company for more than two years, and have been earning close to $15 an hour before the raise.

While these workers’ hourly rates will rise modestly, they said they could lose thousands of dollars that they would have collected from the stock and monthly-bonus programs. Amazon said those who are already making $15 an hour will see an increase in pay but did not specify how much.

So Amazon actually did give out raises, but they also streamlined their compensation package. Many employees were receiving bonuses and discount stock purchase options, but those are going away in most cases. For those who had been there for a while and were already making close to $15 per hour, this works out to be a pay cut. This doesn’t come as much of a surprise since Amazon clearly wants to be competitive in an increasingly tight labor market, but they also don’t want to take a massive hit to their labor costs at the same time.

What we’re also seeing here is one of the dangers of having the government artificially mandate significantly higher minimum wage rates. That wasn’t the case here, but the end result is the same. There were already a lot of workers with various skills earning around that level. These include tradespeople who had to go through apprenticeship programs and gain experience before earning roughly double what the federal minimum wage offers. So what happens when the people doing the least skilled, entry level jobs are suddenly making the same amount of money? Those skilled workers begin wondering why they bothered putting all that work in.

We’re seeing the same thing at Amazon right now. Some people who had been there for a few years are now getting a very modest raise, but the new people coming in the door are suddenly earning almost as much as them. That tends to get under the skin of your workers.

Amazon’s intentions were probably good and after a period of time all of these changes will settle in and become the new normal. But the transition period is going to be bumpy.